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DRS Corporation changed the way it depreciates its computers from the sum-ofthe-year’s-digits method to the straight-line method beginning January 1, 2011. DRS also changed its estimated residual value used in computing depreciation for its office building. At the end of 2011, DRS changed the specific subsidiaries constituting the group of companies for which its consolidated financial statements are prepared. Required: 1. 2. For each accounting change DRS undertook, indicate the type of change Why should companies disclose changes in accounting principles? and how DRS should report the change. Be specific.
DRS's modification in the specific subsidiaries constituting the group of companies for which combined fiscal reports are shown is a modification in reporting entity. earlier fiscal reports aren't recast. Instead. the organization records the modification prospectively. The undepreciated cost remaining at the time of the modification would be decreased by the new estimation of remaining value and the resulting sum would be depreciated over the remaining useful life of the building.Analysis Case 20-10 Requirement 1 DRS's alternation in depreciation method for computer systems shows a modification in estimation caused by a modification in accounting principle. The undepreciated cost remaining at the time of the modification would be depreciated using the straight-line method in the remaining useful life The modification in remaining value for the office building is a modification in accounting estimation. A change in reporting entity is affected and revealed by recasting all prior-period fiscal reports in compliance with the way of showing the present fiscal reports of the new reporting entity. the organization just uses the straight-line method after that. earlier fiscal reports aren't recast. Requirement 2 . This is because a modification in the depreciation method is followed to reflect a modification in (a) approximated future advantages from the asset. however following fiscal reports need not repeat the disclosures. the organization just uses the new remaining value estimation after that. the character of and reason behind the modification should be revealed by footnote. Consequently. (b) the pattern of getting those advantages. In the original set of fiscal reports occurring after the modification. The organization documents the modification prospectively. Rather. or (c) the company’s understanding of those advantages.
Based on the above information. It is to be used as a guide or a reference in order for you to complete your own work All material is copyrighted by the court of law. No portion of the material may be duplicated.ashfordsuperstar. If you have any questions or concerns. Please note the following: This tutorial will be used as such. Here is the link to sign up: http://www. In case an alternation in accounting principle takes place. redistributed without the written consent of AshfordSuperstar. please contact support at: ashfordsuperstar@rocketmail. Disclosure is desirable due to the assumption that an accounting principle when adopted won't change. When accounting modifications take place. -AshfordSuperstar . it is crucial that you do not submit any of these documents ‘as-is’.Using the same accounting rules from one reporting interval to another one increases the comparability of accounting information across accounting intervals. particularly when evaluating tendencies. the character and effect of a modification must be revealed. The FASB’s conceptual framework explains uniformity as among the important qualitative features of accounting information.com/specialinvite Thank you.com PS: Go ahead and sign up to AshfordSuperstar’s newsletter to hear about how you can get free tutorials and other “goodies” to help you succeed in your online class. the effectiveness of the comparative fiscal reports is increased with retrospective use of those modifications.